ITO Vs Alwar Malt and Agro Foods Manufactures Company Limited (ITAT Jaipur)
ITAT Jaipur held that TDS u/s. 194J of the Income Tax Act doesn’t apply to payment made by liquor company towards brand under the head ‘Franchise Expenses’ since the same is not in nature of ‘royalty’ or ‘Fees for Technical Services’. Accordingly, appeal of revenue dismissed.
Facts- The present appeal has been preferred by the revenue. It is mainly contested that CIT(A) has erred in deleting the addition of Rs. 59,11,080/- made u/s 201(1) along with interest u/s 201(1A) of Rs. 42,55,977/- in respect of payments of Rs. 5,91,10,794/- made to three concerns namely M/s Saraya Distilleries Ltd., Pay Fair Enterprise and United Spirits Ltd. under the head “Franchise Expenses” holding that the impugned payments made by the assessee company does not come in the ambit of section 194J of the Income Tax Act, 1961.
Conclusion- On conjoint reading of the provision of the law and considering the material placed on record the assessee prepare separate profit and loss account and as per the agreement profit is transferred though debited under the head fees for Franchisee fees is not the fees for technical services for the rendering of any managerial, technical or consultancy services but are of the business transaction as per the extensive agreement.
